The importance of measuring and analysing customer satisfaction

There was a time when I used to love going out to shop. Gadgets fascinated me and I loved the store experience where I was given a demo of using the products. I used to enjoy talking to store representatives who knew gadgets and getting to use and compare the best and coolest in the market.

I changed one fine day with an extremely patient wait of more than half an hour for a sales representative who was supposed to demo a product that I wanted to buy. I wasn’t enjoying it any more. I walked out an angry man for I thought I did not deserve to be treated this way. My friends have been buying products online as it was considerably cheaper. I hadn’t given way so far in spite of having access to buying it as I enjoyed shopping in a store. In this era where social media and online shopping have taken over traditional sales, I just couldn’t believe what I experienced. I decided, that henceforth, I will buy my products online, delivered at the comfort of my home and spend lesser that I would ever have. Not to mention that I would never return to this shop and I will tweet, blog, post my experience so that my friends don’t either!

Hours later, as a more pacified person, I was thinking about the incident and wondering why this happened? Was it that they didn’t have enough money or resources to invest in well trained sales staff? It certainly does not seem so, considering the amount of advertisements I see or the plush interiors. Then, it struck me, that it was not by choice or resources, but because they were unaware of what I expect them to be. They just didn’t know what motivated me to travel to their shop, what really satisfied me. They probably did not even know that I am an unsatisfied customer!

I’m not alone here. Thousands of customers every day get frustrated with organizations over countless issues. Blogs and forums all over the world are filled with complaints about products, services, stores, after sales support and so on. This brings me to the interesting topic of customer satisfaction; why organizations should care about customer satisfaction and why measuring and analysing this key metric is of paramount importance to any organization.

Customer satisfaction can be quite a vague term and first and foremost needs to be defined. A generally accepted definition of customer satisfaction is that it is the difference in “expected” and “perceived” experience of a customer with a product or service. So how does it explain my case? I walked into the store expecting that the sales person would give me a brilliant demo of the product and I walked out with a perception that the sales people in that organization are no good. That increased the difference in the “expected” and “perceived” value in the negative and made me extremely dissatisfied. On the contrary, if I had not expected someone to give me a great demo and I did indeed get a brilliant one, I’d have been extremely satisfied if not delighted!

So, why is customer satisfaction important? Academic studies in the past have well established the relationship between customer satisfaction and loyalty. They have also established the fact that higher customer satisfaction leads to higher personal consumption expenditure. Not only companies have more loyal customers, they also spend more having a very positive relationship on return on investment (ROI), cash flow as well as long term value of the company! It is no surprise that a company like APPLE has one of the highest valuations and brand loyalty simply because they simply have more satisfied customers than anyone else!

This brings me to another important point on how to measure an abstract term such as customer satisfaction? Organizations who successfully measure customer satisfaction often rely on surveys. Various survey techniques and scales have been developed for this purpose but the most common among them is to use a “Likert scale” which simply measures a customer’s attitude on an attribute in a 5 point scale “Very Dissatisfied to Very Satisfied”. The next question is what attributes to measure? Typically organizations measure 3 parameters and use some sort of weighted combination of these to indicate loyalty which is a good measure of what satisfaction ultimately aims to achieve:

a) Overall satisfaction of product / service

b) Likelihood to repurchase the product / service

c) Likelihood to recommend the product / service

Customer Loyalty = weighted sum of a, b & c

Satisfaction and loyalty are often interchangeably used but it is important to note that satisfaction is just one component of loyalty, but very often an important one. Very often there exists a non-linear relationship between the two, where an extremely satisfied customer will be very loyal and dissatisfied customers will be at risk of choosing another product or service.

It is not only important that one measures satisfaction or loyalty, but also understands what is driving this. Coming back to my own experience, how will the organization know that it was the bad sales experience that left a lot to be desired for me? To measure these, it is common practice to administer a set of attribute questions that may affect satisfaction. Some examples are stated below

How satisfied are you with quality of our products?

How satisfied are you with the variety of our offerings?

How satisfied are you with our sales staff?

How satisfied are you with our after sales support?

Ideally, one should include all such parameters that may affect customer satisfaction. These will enable you to not only understand the key drivers of satisfaction, but can also be used to understand the relative importance of each of these so that one can put their focus and resources on improving those that yield more return.

So, what are the key questions that should be answered as an outcome of conducting a satisfaction survey? In my mind, a well conducted and well analysed satisfaction survey should at least capture:

How satisfied are my customers? Will they repurchase my products? Will they recommend my product to their friends?

How satisfied are sub-groups or segments of my customers (example women vs. men or Indians vs. Americans)

What is driving satisfaction and loyalty?

What is the overall sentiment of my customers and segments?

What are the key themes that my customers and segments are often repeating?

Where should I invest to improve satisfaction?

For a well-executed survey, there exists a plethora of tools and techniques that can be used to find answers to some of these challenging questions. However, the key challenge in using these tools and techniques still remain that these are designed for professionals and statisticians and very often involve programming and math, not to mention the prohibitive cost of licenses!

BRIDGEi2i has developed and recently launched a cloud based app called Surveyi2i, that is effective and easy to use for researchers, analysts and business users alike enabling them to derive meaningful and actionable insights in minutes.

The author, CV Vignesh is an Analytics Manager at BRIDGEi2i Analytics Solutions. He can reached at cvvignesh@bridgei2i.com.

About BRIDGEi2i:BRIDGEi2iprovides Business Analytics Solutions to enterprises globally, enabling them to achieve accelerated business impact harnessing the power of data. Our analytics services and technology solutions enable business managers to consume more meaningful information from big data, generate actionable insights from complex business problems and make data driven decisions across pan-enterprise processes to create sustainable business impact. To know more visit www.bridgei2i.com

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